Costs keep apartment development slow here as it booms in Jacksonville

Stuart Korfhage

Tuesday

Sep 11, 2018 at 6:45 PMSep 13, 2018 at 5:53 AM

In a tight market, St. Johns County renters are seeing new opportunities with robust building. But they'll have to move to Jacksonville to take advantage of them.

Despite massive growth in the residential building sector in the last three or four years here and a huge buildup in demand for affordable housing, there's still scant building activity in the multi-family rental segment.

That doesn't mean there are no rentals available in St. Johns County, but they mostly aren't apartments. Instead, they are single-family homes and condominiums/townhomes that are owned individually or by corporations.

That means securing a rental here can require more legwork. And it also means there is a potential lack of continuity because individual units can be sold with little notice.

It's not getting any easier, either. While thousands of homes are built here every year, those looking for apartments will have to look north for many openings.

According to statistics provided by the St. Johns County Building Department, there were 546 multi-family units permitted here — not counting the municipalities — between 2014 and 2017. By comparison, in just April 2018, there were 522 single-family homes permitted.

In the city of St. Augustine, there have been two multi-family projects permitted in the last five years: Antigua Apartments (249 units) off State Road 312 and The Landing at St. Augustine (273 units) at U.S. 1 North. There are plans for The Landing to build another 312 units in the second phase of development, but those have not yet been submitted for permitting.

Meanwhile, Jacksonville has plenty of options. In the 2017 fiscal year, there were 3,730 apartment units permitted in Duval County, $660 million worth of development. In that same time period, it permitted 2,675 single-family homes. St. Johns County saw 3,755 single-family homes permitted in fiscal year 2017 and has added another 3,835 through July in fiscal year 2018.

So why is there such a huge gap between the apartment development in Jacksonville and St. Johns County? Not surprisingly, it comes down to money.

Katherine Mosley is a principal with TriBridge Residential, which is developer of multi-family housing with three communities in Duval County, and she said it's basically just cheaper and more advantageous to build apartment complexes in Jacksonville.

In an email to The Record, Mosley said the main reasons for the boom in Jacksonville are:

• Concentration of jobs is in Jacksonville.

• Target demographic for apartments is millennials and downsizing baby boomers — this demographic is drawn to the convenience of working, shopping, playing close to where they live.

• Impact fees (concurrency, school impact, water and sewer tap fees) are about three times higher in St. Johns County; this is a significant financial impact for a development (millions of dollars).

In St. Johns County, the impact fee for any residential unit up to 800 square feet is $6,813, and for those up to 1,250 square feet it's $9,161. Those fees will increase to $8,603 and $11,339, respectively, after Jan. 1. The previous fee was $9,770. The fees for larger units increase incrementally.

In the city of St. Augustine, only the school impact fees are collected — $1,435 and $2,625, respectively — but the city does charge for water and sewer hookups. Those costs vary depending on the location of a project.

With so much upfront investment required, some local developers say the costs just don't justify the risk. In addition to the impact fees, most master-developed communities also have community development district fees that would also have to be added into the rent.

All the extra fees along with increasing costs of land and construction simply don't put St. Johns County in good position for multi-family development despite an obvious demand for rentals.

There are some upscale projects coming online in communities like Nocatee, but there isn't much like the complexes going up in Jacksonville near the St. Johns County line.

Batey McGraw, vice president of land for Dream Finders Homes, knows both sides of the equation. Dream Finders builds single-family homes, but he previously worked in the multi-family sector.

He agrees with much of Mosley's assessment of the disparity between Jacksonville and St. Johns County. He said the markets are very different in that so many families are drawn to this county because of the schools and other preferences.

"You have a younger, non-family renter who wants to be closer to their job in Duval County, which drives the apartment demand there," McGraw said. "If you look at apartment communities there, there’s more one- and two-bedroom (units)."

And from the developer's point of view, the fee structure just makes Jacksonville a much better choice, regardless of whether there's a demand in St. Johns County, too.

"In Duval, you really get value out of the density," McGraw said. "I think that’s a big part of why the multi-family growth has been more concentrated in Duval County. It also has to do with job centers, and younger renter in most of those deals is trying to be close to the first job and not seeking out schools."

The high fees associated with apartment development is an issue in places besides St. Johns County.

A release Monday from Florida Realtors recounted an episode last week when the National Association of Home Builders (NAHB) told Congress members that "excessive regulation" leads to higher rents, reduced affordability for consumers and, on average, accounts for almost one-third of a multi-family project's development and building costs.

"Multi-family builders and developers are seeing strong demand, but there are headwinds that have impacted further development," said Steve Lawson, chairman of The Lawson Companies, in the release. "Some developers have had difficulty getting projects off the ground due to regulatory burdens and neighborhood opposition in certain parts of the country."

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